My finance view

The Icelandic government said Monday that it has taken control of the struggling Glitnir bank, marking the first major banking nationalization for the country in the current turmoil.

The government said it bought a 75% stake in Glitnir, the country’s third largest bank, for €600 million euros ($878 million) to ensure broader market stability after it suffered liquidity issues.

Central Bank of Iceland chairman David Oddsson said that Glitnir, which has operations in 10 countries, would have collapsed if the authorities had not intervened.

However, the government said that the bank would continue to operate as normal and that it does not intend to hold its share "for an extended period."

Glitnir itself stressed that its core operations "are solid."

"The board and management of Glitnir have diligently worked at securing the bank’s funding in the past months’ turbulent markets, but unfortunately the bank saw adverse development in the past few days," said Glitnir chief executive officer Larus Welding, who will remain in his position.

"Having the government as an owner strengthens the capital base of the bank and removes all doubt about Glitnir’s financial strength," he added.

The Financial Supervisory Authority said that Glitnir’s capital and asset portfolio is solid and its loan book of good quality payday advance. The capital adequacy ratio will be 14.5% after the government’s action, it said.

Glitnir said that the offer was posed Sunday meeting and the bank’s board voted to accept the proposal at a meeting Monday morning. The bank now plans to call a shareholder meeting to approve the deal.

Trading in Glitnir shares was halted on the OMX Nordic Exchange. 

Source